PRIMA™ (Protected Retirement Income Management Assistant), is an online app from InjAnnuity for evaluating, actively managing and monitoring a 401k portfolio of Investments and/or Variable, Indexed & Fixed Deferred annuities. As such it's an indispensable tool for when the markets get jittery during times of concern. Use its projected lifetime income evaluations to estimate retirement income and address any concerns your clients might have so that they don't make bad and costly decisions in their 401k plan.
PRIMA™ Registry
InjAnnuity provides a Registry for the important players in the 401(k) market, Sponsors, Providers and Fee-Only Financial Advisors (FAs). This is not simply a register, for example, it also allows the Providers to not only list their products but also have the option to work with InjAnnuity to define the data for PRIMA™ so the user doesn't have to manually input any information. Instead they can simply concentrate on setting the clients' goals and have the app do all the complicated calculations. However, even in the absence of this data, PRIMA™ will still allow the user to manually enter the small amount of product and participant info needed to perform its calculations.
In-Plan Deferred Annuities
Deferred Annuities can be complicated. Significantly, till now, FAs have had no effective tool to estimate a contract’s future performance or manage and monitor it for evaluation and decision-making on an on-going basis. If you're not an FA, or don't have experience with Deferred Annuities then you should check out our posted information here before proceeding further.
For the first time ever, PRIMA™ provides FAs with a standardized method and metrics for evaluating investments and annuities that are projected individually or integrated with other DAs and Investments. However, anyone can use the software to do same. How is this accomplished?
Variable Deferred Annuities (VDA)
Variable Deferred Annuities are different from other DA products, in that, the policyholder assumes the risk for their Variable (generally Mutual Funds) investments in the contract. To offset this risk, many products offer a guardrail in the form of riders for various Guaranteed Income Benefits (GIBs), in the event that the market goes south, and their underlying Sub-Account assets follow suit.
These GIB riders can fall into several categories with various titles such as: Guaranteed Minimum Income Benefits (GMIBs), Guaranteed Minimum Accumulation Benefits (GMABs), Guaranteed Minimum Withdrawal Benefits (GMWBs), Guaranteed Lifetime Withdrawal Benefits (GLWBs), to name the most popular ones. They represent the Insurance aspect of the contract and are all designed to provide a minimum income guarantee to the policyholder to hedge against downturns in the Market.
GIB benefits are either a future payout annuity or stream of withdrawals; often, with Guaranteed Withdrawal Benefit Riders (GWBs), the Accumulation Fund will persist until it is depleted by these withdrawals. However, in many cases, after the Accumulation Fund depletes the payments will continue until death of the annuitant or joint annuitants (GLWB – Guaranteed Lifetime Withdrawal Benefit).
For the main Accumulation Fund, Fees and Charges are deducted and Interest is credited, based on the performance of the underlying Sub-Accounts. Therefore, projecting a Variable contract entails a lot of uncertainty, meaning that the app needs to estimate future projections of the Accumulation Fund, parallel Shadow Funds and any related Benefits, such as Income Streams and the Death Benefits that depend on them.
Investments
Handled the same way as Variable Annuities minus the Insurance component.
Fixed Indexed Deferred Annuities (IDA)
With Indexed Annuities, the Policyholder is indirectly invested in the market and is not at the same risk as Variable Annuities. However, like Variable, Indexed Funds are dependent on the markets' performances.
Fixed Deferred Annuities (FDA)
In general, Fixed Deferred Annuities are dependent on the financial performance of the Insurance company. However, their investments are conservative, so DARMA™ projects their returns based on the performance of a passel of typical Insurance company investments.
All Deferred Annuities
No matter which kind of annuity you wish to evaluate, its projected cash flows are discounted based on a scenario's projected inflation.
The Challenge
Determine a sound Scientific Method and Metric for evaluating a contract and projecting retirement income. Provide on-going Management and Monitoring tools
The Solution
New meaningful metrics to measure the plan’s performance. The most important one is ITM© (“In-The-Moneyness”) and it has 2 facets. A plan is ITM when it's outperforming inflation. Basically, it’s a + or – percentage produced by the app where ‘+’ is ITM and ‘-' is not ITM and its size indicates the magnitude of the ITM.
Important Principle
ITM is solely based on future estimated CASH payments to the participant! The App establishes a theoretical Participant Bank Account to process all these projected future cash events:
If the event is not a cash event resulting from the above, in the theoretical Participant Bank, it doesn't contribute to the ITM!
Discounting Future Cash Benefits
ITM is calculated using the time value of money to determine the present value of future cash financial events. This time value of money uses a discount rate that is based on projected inflation. PRIMA™ provides its ITM using projected Stochastic (Randomly generated) Economic Scenarios.
Each Scenario has its own ITM
The App employs a generally accepted approach for generating thousands of future Calibrated Randomly Generated Economic Scenarios, that produce a Frequency Distributions of the continuous random variables for both ITM and AIM (Adequate Income Metric).
Project up to 1,001 calibrated random scenarios for each variable asset category and provide the user with the results of a range, representing the lowest performing percentile to the highest (0 thru 100). The resulting Median Scenario (50th Percentile) is recommended as the app’s standard yardstick for the contract’s performance. The metric can be used both as an indicator of the contract’s value or for comparison with other competing contracts' ITM that were also processed using PRIMA™.
Each Scenario also Produces all future Death Benefits and Income streams for the user's targeted retirement age. Using an existing available Standardized Classification for the Sub-Accounts Funds, each Sub-Account would have its own level of risk, based on the type of underlying asset(s).
The App uses the same classification that Insurance Companies use for their new statutory PBR Valuation requirements.
The app presents an initial questionnaire which allows you to model the contract's main features and Benefits followed by a focused hierarchical outline based on those initial answers.
In PRIMA™, Current Economic conditions are updated frequently, by InjAnnuity, and future Economic Scenarios are re-generated using these current market condition as a seed for utilization by the User.
Things Change! - User Diligence
PRIMA™ produces many sophisticated analytical reports, charts, and audits and provides electable options based on the contract’s rules, to strategize the User’s objectives and optimize the contract’s ITM. The strength of PRIMA™ lies in the simplicity of standardizing the results as an ITM percentage. This is especially useful if you wish to compare different products for potential purchase.
To summarize; this is an on-going process, and the plan should be periodically monitored by the user, in light of many factors, such as economic conditions, changes in a participant's health and longevity, changes to an annuity contract initiated by the company, short-term guarantees, change of a participant’s risk appetite, death of spouse, to name a few. All of these can materially affect the ITM evaluation and, if necessary, may require action by the participant to re-optimize.
Be prepared to invest the small amount of time needed properly use PRIMA™
This might be a challenge for some, but it'll be a valuable investment. The reward will be a clearer understanding of DAs and how a 401k plan behaves, and what you can do with it to maximize your client's retirement income. Bad or no decision-making about a plan can result in the loss of significant income, so needless to say, proper use of PRIMA™ is extremely important.
DON'T DELAY. GET STARTED TODAY!
PRIMA™ Registry
InjAnnuity provides a Registry for the important players in the 401(k) market, Sponsors, Providers and Fee-Only Financial Advisors (FAs). This is not simply a register, for example, it also allows the Providers to not only list their products but also have the option to work with InjAnnuity to define the data for PRIMA™ so the user doesn't have to manually input any information. Instead they can simply concentrate on setting the clients' goals and have the app do all the complicated calculations. However, even in the absence of this data, PRIMA™ will still allow the user to manually enter the small amount of product and participant info needed to perform its calculations.
In-Plan Deferred Annuities
Deferred Annuities can be complicated. Significantly, till now, FAs have had no effective tool to estimate a contract’s future performance or manage and monitor it for evaluation and decision-making on an on-going basis. If you're not an FA, or don't have experience with Deferred Annuities then you should check out our posted information here before proceeding further.
For the first time ever, PRIMA™ provides FAs with a standardized method and metrics for evaluating investments and annuities that are projected individually or integrated with other DAs and Investments. However, anyone can use the software to do same. How is this accomplished?
Variable Deferred Annuities (VDA)
Variable Deferred Annuities are different from other DA products, in that, the policyholder assumes the risk for their Variable (generally Mutual Funds) investments in the contract. To offset this risk, many products offer a guardrail in the form of riders for various Guaranteed Income Benefits (GIBs), in the event that the market goes south, and their underlying Sub-Account assets follow suit.
These GIB riders can fall into several categories with various titles such as: Guaranteed Minimum Income Benefits (GMIBs), Guaranteed Minimum Accumulation Benefits (GMABs), Guaranteed Minimum Withdrawal Benefits (GMWBs), Guaranteed Lifetime Withdrawal Benefits (GLWBs), to name the most popular ones. They represent the Insurance aspect of the contract and are all designed to provide a minimum income guarantee to the policyholder to hedge against downturns in the Market.
GIB benefits are either a future payout annuity or stream of withdrawals; often, with Guaranteed Withdrawal Benefit Riders (GWBs), the Accumulation Fund will persist until it is depleted by these withdrawals. However, in many cases, after the Accumulation Fund depletes the payments will continue until death of the annuitant or joint annuitants (GLWB – Guaranteed Lifetime Withdrawal Benefit).
For the main Accumulation Fund, Fees and Charges are deducted and Interest is credited, based on the performance of the underlying Sub-Accounts. Therefore, projecting a Variable contract entails a lot of uncertainty, meaning that the app needs to estimate future projections of the Accumulation Fund, parallel Shadow Funds and any related Benefits, such as Income Streams and the Death Benefits that depend on them.
Investments
Handled the same way as Variable Annuities minus the Insurance component.
Fixed Indexed Deferred Annuities (IDA)
With Indexed Annuities, the Policyholder is indirectly invested in the market and is not at the same risk as Variable Annuities. However, like Variable, Indexed Funds are dependent on the markets' performances.
Fixed Deferred Annuities (FDA)
In general, Fixed Deferred Annuities are dependent on the financial performance of the Insurance company. However, their investments are conservative, so DARMA™ projects their returns based on the performance of a passel of typical Insurance company investments.
All Deferred Annuities
No matter which kind of annuity you wish to evaluate, its projected cash flows are discounted based on a scenario's projected inflation.
The Challenge
Determine a sound Scientific Method and Metric for evaluating a contract and projecting retirement income. Provide on-going Management and Monitoring tools
The Solution
New meaningful metrics to measure the plan’s performance. The most important one is ITM© (“In-The-Moneyness”) and it has 2 facets. A plan is ITM when it's outperforming inflation. Basically, it’s a + or – percentage produced by the app where ‘+’ is ITM and ‘-' is not ITM and its size indicates the magnitude of the ITM.
Important Principle
ITM is solely based on future estimated CASH payments to the participant! The App establishes a theoretical Participant Bank Account to process all these projected future cash events:
- Future Contributions (including adjustments for inflation)
- Annuity Payments
- Guaranteed Withdrawals Payments
- Death Benefits
- Tax events
If the event is not a cash event resulting from the above, in the theoretical Participant Bank, it doesn't contribute to the ITM!
Discounting Future Cash Benefits
ITM is calculated using the time value of money to determine the present value of future cash financial events. This time value of money uses a discount rate that is based on projected inflation. PRIMA™ provides its ITM using projected Stochastic (Randomly generated) Economic Scenarios.
Each Scenario has its own ITM
The App employs a generally accepted approach for generating thousands of future Calibrated Randomly Generated Economic Scenarios, that produce a Frequency Distributions of the continuous random variables for both ITM and AIM (Adequate Income Metric).
Project up to 1,001 calibrated random scenarios for each variable asset category and provide the user with the results of a range, representing the lowest performing percentile to the highest (0 thru 100). The resulting Median Scenario (50th Percentile) is recommended as the app’s standard yardstick for the contract’s performance. The metric can be used both as an indicator of the contract’s value or for comparison with other competing contracts' ITM that were also processed using PRIMA™.
Each Scenario also Produces all future Death Benefits and Income streams for the user's targeted retirement age. Using an existing available Standardized Classification for the Sub-Accounts Funds, each Sub-Account would have its own level of risk, based on the type of underlying asset(s).
The App uses the same classification that Insurance Companies use for their new statutory PBR Valuation requirements.
The app presents an initial questionnaire which allows you to model the contract's main features and Benefits followed by a focused hierarchical outline based on those initial answers.
In PRIMA™, Current Economic conditions are updated frequently, by InjAnnuity, and future Economic Scenarios are re-generated using these current market condition as a seed for utilization by the User.
Things Change! - User Diligence
PRIMA™ produces many sophisticated analytical reports, charts, and audits and provides electable options based on the contract’s rules, to strategize the User’s objectives and optimize the contract’s ITM. The strength of PRIMA™ lies in the simplicity of standardizing the results as an ITM percentage. This is especially useful if you wish to compare different products for potential purchase.
To summarize; this is an on-going process, and the plan should be periodically monitored by the user, in light of many factors, such as economic conditions, changes in a participant's health and longevity, changes to an annuity contract initiated by the company, short-term guarantees, change of a participant’s risk appetite, death of spouse, to name a few. All of these can materially affect the ITM evaluation and, if necessary, may require action by the participant to re-optimize.
Be prepared to invest the small amount of time needed properly use PRIMA™
This might be a challenge for some, but it'll be a valuable investment. The reward will be a clearer understanding of DAs and how a 401k plan behaves, and what you can do with it to maximize your client's retirement income. Bad or no decision-making about a plan can result in the loss of significant income, so needless to say, proper use of PRIMA™ is extremely important.
DON'T DELAY. GET STARTED TODAY!